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The ECB has just delivered a strong positive catalyst for the European banking sector. European bank credit and equity are currently trading close to multi-year/decade lows. This is an important day for bank investors, especially since the market has not yet understood the positive consequences.
The ECB is going to pay European banks to lend money to the real economy. Under a new TLTRO II programme with 4-year maturities, banks will be able to borrow up to one-third of their loan books at an interest rate between the current marginal rate of 0% and the deposit rate of -0.4%.
To put it bluntly, banks are being paid to lend money to the real economy.
